RBA Monetary Policy Decision Summary - February 2025

Written By Justin Barnes

RBA Monetary Policy Decision Summary - February 2025

Key Decision

  • The RBA Board has lowered the cash rate target to 4.10% (from what appears to be a higher previous rate)

  • The interest rate on Exchange Settlement balances reduced to 4%

Rationale for Rate Cut

  • Underlying inflation is moderating, measured at 3.2% in December quarter

  • Inflation has fallen substantially since its 2022 peak

  • Private demand growth remains subdued

  • Wage pressures have eased

Cautionary Elements

  • Upside risks to inflation remain

  • Recent labor market data unexpectedly strong, suggesting tighter conditions

  • Underlying inflation forecast revised slightly up for 2026

  • Productivity growth has not picked up, keeping unit labor costs high

Economic Outlook

  • Overall output growth remains weak

  • Private domestic demand recovering slower than expected

  • Uncertainty about persistence of household spending recovery in late 2024

  • Labor market conditions remain tight and may have tightened further in late 2024

RBA's Position

  • Committed to sustainably returning inflation to the 2-3% target range

  • Monetary policy will remain restrictive even after this rate cut

  • The Board remains cautious about further policy easing

  • Future decisions will depend on economic data, particularly inflation and labor market trends

Justin Barnes
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